Scottish Widows has announced plans to divest £440m from companies that do not meet the environmental, social and governance (ESG) standards outlined under its new policy.

The policy targets companies which derive more than 10 per cent of their revenue from thermal coal and tar sands, manufacturers of controversial weapons and violators of the UN Global Compact on human rights, labour environment and corruption.

However, it clarified that this may not apply where the size and type of investment means that the insurer can influence positive change in their business models.

Scottish Widows claimed it was the “most far-reaching exclusions policy” from a major pension provider and will protect around 6 million customers from ESG-related investment risk.

The exclusions will be applied across Scottish Widows’ investment, life and pension funds, as well as index trackers and its own active funds, with further plans to extend the policy to external pooled funds in the future.

Commenting on the policy, Scottish Widows head of pension investments, Maria Nazarova-Doyle, said: “As a large institutional investor, we have a vital role to play in shielding our customers from ESG investment risks, as well as influencing positive change through the investments we hold.

“Our exclusions focus on companies we believe pose the most severe investment risk due to the nature of their businesses, which can’t be addressed through engagement.

“The growth of these ‘at risk’ companies is likely to be severely limited by future regulations and the changing views of customers and investors, leading to significant falls in their share prices."

She added: “We’ve worked hard to implement our exclusions across our fund range without limiting this initiative to our actively managed funds. We’re excluding investments from the index trackers which underpin our flagship multi-asset funds too.

“We recognise there’s more we can do as a company and that this is just one step in the journey.

"However, this underlines our commitment of becoming a market leader in responsible investment and to make a real difference.”

The University Superannuation Scheme (USS) also announced exclusion plans for a number of companies deemed "financially unsuitable" for the scheme earlier this year, including thermal coal mining and tobacco manufacturing.

This also follows the news that government-backed pension scheme, Nest, has divested from tobacco a year ahead of schedule.

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